Introduction
Are you looking to understand about Everything You Need to Know About Section 43C of Income Tax Act 1961 – Special Provisions for Computation of Cost of Acquisition of Certain Assets?
This detailed article will tell you all about Everything You Need to Know About Section 43C of Income Tax Act 1961 – Special Provisions for Computation of Cost of Acquisition of Certain Assets.
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When it comes to taxation, every little detail matters. One such detail is the computation of the cost of acquisition of certain assets. Section 43C of Income Tax Act 1961 contains special provisions that govern the computation of this cost. In this blog, we will delve into the details of this section and discuss its implications for taxpayers.
What is Section 43C of Income Tax Act 1961?
Section 43C of Income Tax Act 1961 contains special provisions for the computation of the cost of acquisition of certain assets. This section applies to the following types of assets:
- Goodwill of a business or profession
- Trademarks, copyrights, patents, or any other business or commercial rights of similar nature
- Know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature
- Shares in a company, if such shares are acquired by the assessee by way of allotment before the 1st day of April 2017
The section lays down a specific formula for the computation of the cost of acquisition of these assets, which is different from the normal rules that apply to other assets.
How is the Cost of Acquisition Computed under Section 43C?
The cost of acquisition of assets covered under Section 43C is computed as follows:
- For assets acquired before the 1st day of April 2002, the cost of acquisition is taken as the actual cost of the asset.
- For assets acquired on or after the 1st day of April 2002 but before the 1st day of April 2017, the cost of acquisition is taken as the actual cost of the asset or the fair market value of the asset as on the 1st day of April 2001, whichever is higher.
- For shares in a company acquired by the assessee by way of allotment before the 1st day of April 2017, the cost of acquisition is taken as the fair market value of such shares as on the 1st day of April 2001.
FAQs
- Who is covered under Section 43C of Income Tax Act 1961? Ans: Section
43C of Income Tax Act 1961 applies to individuals and entities who have acquired certain assets such as goodwill, trademarks, copyrights, patents, and shares in a company.
Are there any exceptions to the formula for the computation of cost of acquisition under Section 43C? Ans: Yes, there are some exceptions. If the asset has been revalued before the 1st day of April 2001, the revalued amount will be considered as the cost of acquisition. Also, if the asset has been acquired by way of gift, will, or succession, the cost of acquisition will be taken as the cost that would have been taken if the previous owner had acquired the asset.
How does Section 43C affect the taxation of these assets? Ans: The cost of acquisition computed under Section 43C is used to determine the taxable capital gains or losses when these assets are sold or transferred. Therefore, it is important for taxpayers to understand the provisions of this section to ensure that they are paying the correct amount of tax.
Conclusion
Section 43C of Income Tax Act 1961 contains special provisions for the computation of the cost of acquisition of certain assets such as goodwill, trademarks, copyrights, patents, and shares in a company. The section lays down a specific formula for the computation of the cost of acquisition, which is different from the normal rules that apply to other assets. It is important for taxpayers to understand these provisions to ensure that they are paying the correct amount of tax. If you have any further questions about this section or any other tax-related matter, it is always best to consult a qualified tax professional.
Section 43C, of Income Tax Act, 1961
Section 43C, of Income Tax Act, 1961 states that
(1) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of an amalgamated company under a scheme of amalgamation, is sold after the 29th day of February, 1988, by the amalgamated company as stock-in-trade of the business carried on by it, the cost of acquisition of the said asset to the amalgamated company in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the amalgamating company, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer by the amalgamating company.
(2) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of the assessee on the total or partial partition of a Hindu undivided family or under a gift or will or an irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade of the business carried on by him, the cost of acquisition of the said asset to the assessee in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the transferor or the donor, as the case may be, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer (by way of effecting the partition, acceptance of the gift, obtaining probate in respect of the will or the creation of the trust), including the payment of gift-tax, if any, incurred by the transferor or the donor, as the case may be.